Search Indian Express – China new silk road hits 14 billion $ pothole in Pakistan
Salami Slicing
- A strategic approach by China
- In which China makes small but steady inroads into another territory, which is enough to expand its foothold without aggrevating the situation in a war
- Eg – Doklam crisis
Doklam Valley crisis
- Victory for India – Both soldiers removed troops
- Tangible Impact
- ASEAN countries – Republic Day
- Maldives – China says 0 We donโt want another Dokalm. Hence talking with India
- Resolute but not waged a war
- India showed that to safeguard our interests, we are ready to even step out of our territory
- India showcassed it might and aspiring status
- Countered the belief that China can’t be countered
- Defended our ally Bhutan
- Prevented from it getting coerced into joining Chinese Orbit
- Rumpurs of exchange of Doklam for greater are in the North of Bhutan
- Laid a template for other states, who have witnessed a similar chinese agression, to follow
- Should discred the Chinese leadership and weaken the leadership
- A framework to unite countries –
- Japan has supported
- Other countries like Vietnam, Indonesia, Phillipines have had differences, and there may be a new Convergence of interests
- Tangible Impact
- ” The supreme art of war is to subdue the army without fighting ” – Sun Tzu, Chinese military strategist
- Similar crisis averted in TUTING, arunachal
- Why China doing ?
- Current
- Elections in CPC – hence a fervor of nationalism
- Possibly a retaliiation against India , Japan, US coming together ( Malabar exercise)
- Plan
- Attempt to choke Siliguri corridor
- May not have anticipated Indian entry and Bhutanese effective opposition
- General trend –
- over ambition – 9 dash line
- Boost by BRI
- American Power Vacuum
- Veil against sluggish growth
- Current
- India’s objections
- 1988 and 1998 agreement with Bhutan and 2012 with India to maintain status quo
- Security Implications
- Siliguri Corridor
- Coercion of Bhutan, an Indian ally
- McMohan
- Connection to McMohan – China insists on 1899 treaty with British but purposely rejects McMohan
- Standoffs
- Doklam – Largest stand off since 1986
- Others
- Daulat Beg Oldie
- Chumar in Ladakah
- PANGONG TSO lake
- Other strategically important points – But no standoff
- Chumbi Valley in China – the valley connecting with India – issues- Siliguri corridor, Difficulty of Indian forces in manouvering in the region due to difficult terrain, Nathu La Paas nearby – Although there has
- Tawang
- Shaksgam Valley – That Pak ceded to China
- Siachen
- Other learnings
- Border Infra growth
India – Border roads on India China border – CAG – only 35% completed
- Other irritants
- Border –
- Dokalm, McMohan, Siachen, Tawang , Shaksgam Valley
- Western Frontier – India says that Johnson line is the real boundary which China claims the McDonald Lines to press its claims over Askai Chin
- Eastern Frontier – McMohan Line
- China accepts the McMohan line itself as the border between china and Myanmar
- Border –
- Pakistan
- 45 billion dollars CPEC through PoK
- and control of Gwadar port
- As well as deployment of Chinese navy allowed
- and control of Gwadar port
- Shaksgam Valley
- Massod Azhar
- NSG, UNSC at Paks Behest
- Allegations of Nuclear Tech trasfer, Missile transfer, other millitary sales – eg JF 17
- 45 billion dollars CPEC through PoK
- String of Pearls
- Long term port contacts
- Hambantota
- Hambantota also shows the vested Chinese design of forcing a country into political dependence
- Kyaukyu in Myanmar (Pneumonic – Kya Kyu ??)
- Sittwe just nearby
- But is much smaller
- Chittagong in Bangladesh
- Maldives
- Signed FTA recently
- Stapled visa to Arunachal
- Cyber
- Hacking
- Chinese companies such as Huawei have been accused even in the US
- River Water Dispute
- Creation of Dams in Brahmaputra
- Dalai Lama
- OBOR
- Trade Imbalance
- Trade deficit of 45 billion $
- Main reason
- India exports labour intensive low tech, raw materials like cotton, minerals
- China does value addition and sells goods like 3Es electronics (Electronics largest export from China to India )
- Artificially devaluated currency
- State led distortion in land, labour market
- Restrictions on Indian pharmaceutical, services export
- Recent ban on iron ore exports
- It is a structural phenomenon. Not just with India
- China Nepal
- One China Policy
- Recognition of Tawang
- China wants India to accept the political and economic disparity
Convergence
- No bullet has been fired since 1967
- Political
- BRICS, SCO, BCIM
- Reforming financial institutions
- India and China suffer from the distorted mandate in US led Bretton woods institution
- This led to BRICS bank and AIIB , Quota reforms in IMF
- Economic
- Modi “China is the world’s factory while India is the world’s back office
- Trade at 70 billion $
- One of the largest, varies depending on the world. Ocassionally, US, UAE take lead
- Sister cities in Smart city
- With Bangalore, Hyderabad & Ahmedabad
- Security
- Manner in which Doklam Crisis was resolved Peacefully
- A hotline between the 2 army headquarters will be established to resolve confusions
- Terrorism
- China – Suffers too in Xingxiang Province
- Recent BRICS deration in Xiamen – Calls for Pak to put greater pressure on Terrrorists operating in Pak
- Global trade
- Both part of G33
- India and China both face the challenge of western minded WTO
- China initially supported India about her reservation on agriculture subsidy
- Climate commitments
- Both believe in CBDR to true extent
- Formed like minded group (LMG) to press for the cause
- S&T
- A recent agreement for cooperation in the space research between the 2 countries
- IDEA OF PEACE
- PANCHSHEEL
What to do more ?
- The above Convergence issues
- DGMO level hotlines agreed I 2015 needs to be expedited
- Border Infra
- Backchannel talks
- Both countries should follow the SPIRIT of Border Defence Cooperation Agreement of 2013
- Arms
- India should HOPE for the BEST and PREPARE for the WORST- CONCLUSION
OBOR
One belt, one road – Now called BRI – Belt and Road Initiative
29 HoS in BRI inaugration
Challenges to India
- CPEC through PoK
- Issues to India
- Accepting of OBOR Formal legitimization of PoK – Gilgit Baltistan
- May mean greater exploitation of the Baloch people
- Fear that the part could be transferred to China just like shaksgam valley in 1963
- String of Pearls
- Esp India is anxious about the Chinese Naval presence at the Gwadar Port
- Medium to provide funds to Pak Millitary
- Pak based industries complaining of missing out
- New Colonisliam
- Debt problem
- Environment issues
- India also complains of Lack of Transparency
- Local Population opposition
- Large Dams planned – 7k MW – Dispacement of People
- Environemtn Issues – EU changed the joint statement
- Leads to leveraging of countries and may cause permanent Chinese dependency
- Hambantota in Sri Lanka
- Indian Eonomic Competitiveness
- CPEC being extended to Afghanistan
- Reasons
- Genuine – To clear Xingjiang region of Terrorism, make CPEC economically viable, and also provide CPEC better shield by involving Afghan
- De Facto – String of Pearl, Chinese global outreach ( also is trying to broker peace in Myanmar with Rohingyas )
- Impact on India
- China – String of Pearls, and Chinese Economic Diplomacy
- Pakistan may influence the Indian policy of Afghanistan
- Reasons
- Isn’t India going to isolate economically ?
- In contrast -after Indian stance, many European countrires, Sri Lanka, Tanzania etc are reconsidering their stance
- Maybe
- 29 HoS participated
- Even US, Japan sent resentratives
- Participation of Neighbours like Myanmar, Pak, Ban, Nepal
- India will have to fund through AIIB
- UN secretary general also cxalled for India
- Not so much.
- Write Convergence of interests with China
- Convergence of Interests with other countries like US, Europe and Japan who have shown Ambivalance to China
- Other alternatives
- Japan
- India, Japan – ASIA AFRICA GROWTH CORRIDOR – being worked out
- Will focus more on Small Industries like Pharma, Food Processing though instead of Infra project like China
- Project Mausam , IORC, BIMSTEC
- May Cherry Pick parts of OBOR
- Like Maritime Silk Road
- INSTC, SCO,
- Trans Asian Railway – ITI – DKD
- Japan
- Plus, joining it may mean Chinese workers, Chinese terms and conditions and Chinese debt which may not be very favourble to India
- We may continue to enjoy certain benefits
- Terrorism down with Development in Pak, Xingjiang
- Profit via AIIB – since India 2nd largest shareholder
- India can use the infrastructre to expans connectivity with Central Asia
- Even if there is, I think itโs a price worth paying for to defend Indian sovereign interests and India standing on its own feet shoulg go as a message of Superpower in Making
Benefits to China
- ” The supreme art of war is to subdue the army without fighting ” – Sun Tzu, Chinese military strategist
- Africa, Phillipines, Pakistan
- Marshall Plan of China
- Outreach at a time when Trump is using isolationist policies
- May become the 1st superpower to become so without using military might as Britain or US did
- So west is seeing de-globalisation, and seemingly China and the East are filling that gap
- Malacca Dilemma
- Economic
- Fiscal Stimulus – Currently Growth at 6.5%
- Trnsportation cost – New Economic Geogrphy – Krugman – Competitiveness of Chinese Firms
Cost
- 150 billion $ from China expected
- Largest in CPEC
- Also imp in Myanmar, Ban, Nepal, Venezuela, Saudi
History of China
- During Deng Xiaoping ( the moderniser ) , philosophy was ” to hide our capabilities and bide our time and never claim leadership”
- And now it’s philosophy is ” winning without fighting”
- Chines policy wrt India recently
- China views India as a swing state that can move towards US, or towards China, depending on the incentives
- Thus, of recent China has been approaching India
- Has offered membership of Shanghai Cooperation Organisation & APEC
Chinese Ambassador to India pointed areas where cooperation can be increasde
- Opening up trade office in Lhasa, at the place where India’s Consular Generla office used to exist till 1962
- FTA
- But, FTA can’t be goods centric
- Must be tilted towards services and IP
- Air connectivity from New Delhi to Xingjiang
- Would boost trade and more importantly counter – terror operations
- Resolve Border issues
- India part of OBOR
Indian policy
- “Part engagement , part containment”
Tibet
- 1,20,00 Tibet refugees in India
- Violence in the region could push more while increasing millitary confrontations
- India could pave a middle path for Tibet by seeking greater autonomy on the lines of Hong Kong, Macao
South China sea problem
- Paracel Islands, Spratly islands, Scareborough Shoal
- Countries involved – China, Taiwan, Phillipines, Indonesia, Brunei
- China claims all the island chains within the 9 dash line
- China is building artificial islands on the Mischief Reef , Subi Reef etc
- Woody Island a island occupied by China, but also claimed by Taiwan & Vietnam was recently militarised and China installed a SAM
- Why important
- South China sea expected to contain vast crude oil and natural gas reserves
- Strategic Signalling
- Major trade route passes through it
- China will be able to make it secure
- And dirupt that of others
- India
- Vietnam Oil exploration
- Repurcusions on the Indian border
- Environment
- Coalition against China
Malacca dilemma
- Issue
- Most of Chinese energy supplies/ goods to trade pass through the Strait of Malacca
- Problem- This is secured by the American Forces (around Singapore)
- In the event of tussle with US, India,… This Sea Line of Communication (SLOC) can be closed
- Just as Suez was shut to Israel after the war of 1967 with Egypt
- Circumventing startegy
- Oil pipelline through Myanmar
- Will send oil from Indian ocean to China via Myanmar without requiring Malacca
- Chinese naval exercise in the Lombok strait near Indonesia, which provides alternative route
- Economic collaboration with the smaller island countries of Indian ocean theough the Maritime Silk Route
- Oil pipelline through Myanmar
CHINESE ECONOMY (Eco -2)
Why growth in China ?
- Liberalisaton by Deng Xioping
- Reversal of cultural revolution – private enterprenership again
- Financial reforms in the rural side- Led to growth of private enterpreneurship in the rural areas – eg no collateral required for loans
- Givt prices
- Artificially keeping labour prices low
- Depreciated currency
- Infusion of technology
- Simultaneous invesment in infrastructure
Success
- Wrt India
- In 1960s China had a lower GDP than India
- Overtook India in per capita in 1990
- Higher HDI index
- According to IMD, the baton for “engine of growth” of global economy shifted from US to China in 2006 (% share in rise in GNI of world )
- 2nd largest economy, PPP at 13 trillioon $
Timeline of events since financial crisis
- Pre Financial crisis
- Export dependent
- Current Account Surplus 10% of GDP (:P)
- Now 2% ๐
- Financial shock
- Growth led model could possibly collapse
- Hence need to look inwards
- Post Financial shock
- Need to shift structurally from export driven to domestic consumption led a
- Massive 600 billion $ stimulus programme
- Massive investment in infrastructure at home
- Local/Provinvincial govt follow a Deficit Financing Stimulus
- Also builds up a bubble in real estate and share market
- Possibly because of shift in investor capital
- Need to focus on the Developing countries
- Built NDB, AIIB for better returns and monetary support
- Slew of infrastructures – Silk Road Belt, Maritime Belt, String of Pearls
- Bilaterally- China- Russia 400 billion $ gas deal, 45 billion$ in Pak, expansion in Africa (data required)
- Need to make renminbi as a vehicle currency by including in SDR
- Made it more market oriented
- Yuan allowed to appreciate by 25% since 2007
- That is why surplus also dropped to 2% of GDP
- Update – Renminbi included as a SDR
- Benefir for India- Renminbi will be market driven and is less likely to remain undervalued
- Triffin Dilemma
- Says about the cons of a currency becoming global
- It can truly become global if it has a Current Accunt Deficit CAD
- So that the currency supply is large and it becomes widely available – by paying for the imports
- Need to shift structurally from export driven to domestic consumption led a
- Benefit
- Short term
- Helped get back to the 10% growth levels quickly
- Inward expansion- domestic consumption arguably more sustainable
- But,
- Debt problem with provinces
- The total loans at risk stand over 600 billion $, a value that triggered the subprime mortgage crisis in the US in 2008
- Speculative bubble in share market
- Share market collapsed in 2015
- GDP down to 7%
- Structural issues
- Rising wages
- 4 times as much in India
- Demographic window closing as population slows
- Hence, 1 child policy has been relaxed
- Xi’s crackdown on corruption can slowdown spending in the Short run
- Rising wages
- Debt problem with provinces
- Short term